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6 Things Boomers Need to Know About Obamacare

Here's a rundown of the myths, reality and key deadlines for your health coverage

By Elizabeth O'Brien | MarketWatch | October 1, 2013

Open enrollment has begun for the health-insurance exchanges established under the Affordable Care Act. But whether Oct. 1 has been circled on your calendar for months, or whether you’re just starting to pay attention, there are certain things about the law that everybody over 50 could benefit from understanding better.
 
Coverage under plans bought on these state-level marketplaces will start on Jan. 1, 2014, the same day that many of the law’s health-insurance industry reforms take effect. Among those reforms is guaranteed coverage for everyone, regardless of health status — a huge boon to the many boomers with pre-existing conditions.
 
Not only will insurance become more accessible, it will also be cheaper than comparable coverage today for those who qualify for government subsidies. That’s a combination of benefits that some experts have called a “game changer” for early retirees and self-employed boomers.

(MORE: 5 Obamacare Scams and How to Avoid Them)
 
But most people of any age who don’t have employer-sponsored or government health insurance must buy insurance or pay a penalty if they don’t enroll by the end of open enrollment on March 31, 2014.
 
With all this in mind, here are six things that boomers need to know about Obamacare.
 
1. The health exchanges aren’t for everyone. You needn’t take any action if, like many Americans, you get health coverage through your job. The marketplaces are for those purchasing “non-group” individual and family coverage, and for small businesses with 50 or fewer full-time equivalent employees.
 
What’s more, people 65 and over who are on Medicare needn’t act to continue getting their government benefits. There are scammers asserting otherwise in an effort to obtain sensitive personal information. But you can ignore them, because Medicare fulfills your insurance requirement: You won’t be subject to any penalties and you don’t need to obtain a new health-care card.

(MORE: Your Guide to Obamacare Options)
 
The Affordable Care Act did include some changes to Medicare that are already in effect, including expanded preventative screenings that are free to recipients. (Those with private insurance get a similar benefit.)
 
If you don’t get coverage through your job and you’re not on Medicare, Medicaid, or certain military or veterans’ plans, you will be required to buy health insurance or pay a penalty at tax time. The fee in 2014 is 1 percent of your yearly income or $95 per person for the year, whichever is higher. The fee escalates and in 2016 will be 2.5 percent of income or $695 per person, whichever is higher (up to a relatively high cap).

You may not owe the penalty if you qualify for an exemption on grounds including being uninsured for less than three months, being unable to afford coverage due to very low income, or being a member of a recognized religious group with objections to health insurance.
 
2. You’re guaranteed coverage. This is a biggie, especially for boomers: Starting in January, insurance companies will no longer be able to deny individuals coverage based on pre-existing conditions such as diabetes or high blood pressure. What’s more, people with pre-existing conditions can’t be charged more based on their health status or issued a policy that excludes coverage for their particular condition, practices that remain common today.

(MORE: How to Ease the Bite of High-Deductible Health Plans)
 
Twenty percent of the 50-to-64 demographic went without health insurance for at least part of 2012, up from 15 percent in 2005, according to the Commonwealth Fund, a New York-based private foundation.
 
3. Your rates can rise, but not because of your health. Starting Jan. 1, insurers can no longer raise prices for a policyholder after he’s gotten sick. Today, it would be common for a person with individual coverage who was diagnosed with, say, cancer, to see big premium increases at policy renewal time. Since his cancer would seriously limit his other insurance options, he’d have little choice but to pay the increase in order to keep his coverage.
 
Policyholders won’t face this predicament any more, but that doesn’t mean their rates won’t rise. Premium prices for marketplace plans will remain stable throughout each calendar year, but can be raised from year to year for everyone in your policy group—that is, everyone who bought the same kind of plan from the same insurer.
 
The first coverage period is Jan. 1 through Dec. 31, 2014. Insurers face many uncertainties with this new market, and they will likely adjust their prices once they have more information, experts say. For example, if a disproportionate number of older and sicker people sign up for marketplace coverage, it will increase insurers’ costs, and companies may pass along some of this increase to policyholders. Consumers will be informed of 2015 premium prices during open enrollment next fall, which will run Oct. 15 through Dec. 7, 2014, when they will have the option of switching plans.
 
4. You need to enroll in the ‘right’ state. Each state will have a health-insurance marketplace, and people must sign up for insurance in the state of their primary residence. Plans will include coverage for any emergencies that happen when you’re traveling out-of-state.
 
Snowbirds who split their time between states will likely have multistate plans to choose from on the marketplaces.

Details for these plans will become available when the Office of Personnel Management announces the contracts, according to a spokesperson. Some may be regional plans that cover a large metropolitan area that crosses state boundaries. But it’s possible that a given multistate plan may not meet the needs of someone who spends, say, half the year in New York and the other half in Florida.
 
Currently, some snowbirds are served by what’s known as a “wraparound network,” whereby a claims-management company contracts with the primary insurer to lease a provider network that the insurer’s members can access when they travel outside the primary network area, said Terri Welter, principal at ECG Management Consultants, a Seattle-based consulting firm to the health-care industry. While it’s not clear yet, it’s possible this type of system may continue with some plans on the exchanges, she said.
 
If you move out of state, you’ll need to re-enroll for coverage in your new place of residence. A move will be considered a “qualifying life event” that will allow you to sign up for coverage outside of the open enrollment period.
 
5. You may have more mobility, in work and life. These new marketplaces will bring increased mobility to early retirees and self-employed boomers, according to Gary Claxton, vice president at the Kaiser Family Foundation, a nonprofit organization that does health-policy analysis, health journalism and communication.

Some people today find themselves stuck in a given place because they’re wedded to their current insurance policy until they become eligible for Medicare at age 65. This can happen if they developed a medical condition while on the policy that would prevent them from passing underwriting elsewhere.
 
In addition to geographic mobility, the Affordable Care Act will also increase job mobility for boomers, experts predict. Many people are expected to retiree early or set out their own shingle, since they’ll no longer be tethered to their job for the health benefits, a phenomenon known as “job lock.”
 
6. Your taxes could get more complicated. Those whose incomes fluctuate may see their eligibility for subsidized coverage wax and wane alongside their income. If this happens, they will need to reconcile any overpayments or underpayments at tax time.
 
Households qualify for subsidies if members earn up to 400 percent of the federal poverty level, or $94,200 for a family of four, $62,040 for a family of two, and $45,960 for a single person.

The Kaiser Family Foundation has an online subsidy calculator that will give you an estimate of your subsidy amount. For example, a 60-year-old nonsmoking couple making a combined $60,000 per year could receive a government tax credit of $10,682 for a silver plan on the exchange, leaving them to pay the remaining $5,700 in annual premium payments. (The subsidy declines as income rises, up to the threshold.)
 
People who initially qualify for subsidies on the exchanges will have a choice of how to take them: They could have the subsidy applied directly to their premium, a method that lowers monthly costs and is called an advanced tax credit; they could have a partial subsidy applied to the premium; or they could opt to take the full subsidy in the form of a credit at tax time.

Those whose incomes rose above the subsidy-eligibility threshold during the year and who chose the first option will have to pay back any excess advanced payments when they file their federal taxes. Conversely, those who received less in advance payments than they’re due will receive the difference as a refundable credit at tax time. 

Elizabeth O'Brien is a retirement healthcare reporter for MarketWatch. Email: Elizabeth.O'Brien@dowjones.com

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